Spotify
Posted by: Voltaire on 14 June 2009
Ok, so maybe I'm a bit slow on the uptake but, how does Spotify make any money? I mean, their business model just doesn't have any longevity.
Even if a free user is subjected to adverts (which they ignore which advertisers know which means that advertisers will not pay top rates), how can the revenue generated cover the PRS royalties (each time you listen to a song or album the creator must get paid) plus server space, web time, admin, accounts, advertising etc.,?
Even the £10 monthly fee can't possibly cover the costs of providing that much music no matter how many members you have?
Please enlighten me.
Gordon
Even if a free user is subjected to adverts (which they ignore which advertisers know which means that advertisers will not pay top rates), how can the revenue generated cover the PRS royalties (each time you listen to a song or album the creator must get paid) plus server space, web time, admin, accounts, advertising etc.,?
Even the £10 monthly fee can't possibly cover the costs of providing that much music no matter how many members you have?
Please enlighten me.
Gordon
the reason it works for Spotify is that labels opt in to receive a % of advertising and subscription revenues proportionate to the playcount. My understanding is that the mechanical royalty model for subscription services (use of songwriting copyright) is also generated in a similar way.
It is the same with a subscription service like eMusic (anyone use that? I hear it is bigger in the US). Revenue is split based on popularity of download NOT royalty per download. For a Naim Label track that means 2p per song (average) as opposed to 39p per song for iTunes (makes iTunes look good!).
Going back to my original point, simply it is hard to pay for recording and marketing if a whole album is sold for 20p! If your artist is only getting 10p of that 20p...they'd probably give up and get a 9 to 5 (unless you are a major artist).
You guys are right, the 7digital tie up should help (is what we7 already do but that is integrated) and actually I've found using 7digital quite easy myself. Shame they are MP3s. I've met with 7digital before about their services. Understandably they admit that getting Majors to license anything near CD quality is nigh on impossible.
But for smaller outfits (and we've done this with www.naimlabel.com) entrusting masters to our customers (DRM free) is key to survival right now!
I think we buying few have trouble understanding how people can see no value and music and hence feel no guilt, but they are unfortunately the majority! And now we've given them a taste of how easy copyright theft is it is going to be hard to change their ways!
It is the same with a subscription service like eMusic (anyone use that? I hear it is bigger in the US). Revenue is split based on popularity of download NOT royalty per download. For a Naim Label track that means 2p per song (average) as opposed to 39p per song for iTunes (makes iTunes look good!).
Going back to my original point, simply it is hard to pay for recording and marketing if a whole album is sold for 20p! If your artist is only getting 10p of that 20p...they'd probably give up and get a 9 to 5 (unless you are a major artist).
You guys are right, the 7digital tie up should help (is what we7 already do but that is integrated) and actually I've found using 7digital quite easy myself. Shame they are MP3s. I've met with 7digital before about their services. Understandably they admit that getting Majors to license anything near CD quality is nigh on impossible.
But for smaller outfits (and we've done this with www.naimlabel.com) entrusting masters to our customers (DRM free) is key to survival right now!
I think we buying few have trouble understanding how people can see no value and music and hence feel no guilt, but they are unfortunately the majority! And now we've given them a taste of how easy copyright theft is it is going to be hard to change their ways!
I really think that Spotify is great, sincere thanks to Lontano for getting me involved.
I have paid the £10 a month to get rid of the adverts and await improved sound quality with bated breath.
One to point to note though is the streaming process that Spotify uses. They proudly advertised that they had solved streaming issues. They solved streaming issues by dumping the content onto your hard drive then playing delayed content from that location and then deleting the HDD dump shortly after. The default is set to use 10gb of your HDD. This means that if you use Spotify a lot as I now do, your HDD is taking a real pounding. On my main computer that isn't a problem but on my laptop...
I have paid the £10 a month to get rid of the adverts and await improved sound quality with bated breath.
One to point to note though is the streaming process that Spotify uses. They proudly advertised that they had solved streaming issues. They solved streaming issues by dumping the content onto your hard drive then playing delayed content from that location and then deleting the HDD dump shortly after. The default is set to use 10gb of your HDD. This means that if you use Spotify a lot as I now do, your HDD is taking a real pounding. On my main computer that isn't a problem but on my laptop...